Oklahoma non-compete

All about Oklahoma non compete law – from the employer and employee perspective. Is your non compete enforceable? What can an employer do to protect itself from an employee taking it property or customers? Answers to these questions and more about Oklahoma non compete law.

Oklahoma Non-Compete Agreements: Questions & Answers

This Blog contains a substantial amount of material on Oklahoma non-compete agreements. 

With that in mind, I thought it would be helpful to boil down all of the material to a brief series of questions and answers.  The result of the boil is below.

What is an Oklahoma non-compete agreement?
While the phase “non-compete” is used in different ways relating to employment contracts, when I say “non-compete”, I mean the pure non-compete which prevents an employee from working in the industry. The pure non-compete, as I discussed in this blog post, is typically unenforceable under Oklahoma law.  Consider the language below as an example of a pure non-compete restriction:

Employee shall not, within a radius of fifty (50) miles from anywhere that Employer maintains an office or facility from which Employer’s business is then-conducted, serve as an incorporator, director, officer, partner, employee, manager, consultant, agent, independent contractor, advisor, stockholder or otherwise, or directly or indirectly own an interest in, provide any financing for, or perform any services for himself herself, or on behalf of any person, business, corporation, partnership~ entity or organization that directly or indirectly engages in competition with. the Business engaged in by Employer.

What is the difference between an Oklahoma non-disclosure agreement and an Oklahoma non-compete agreement?
An Oklahoma non-compete prohibits a person from working in a business or industry, while a non-disclosure agreement prohibits a person from disclosing or using materials that have been deemed “confidential.”  You can read more about Oklahoma non-disclosure agreements here

Are pure non-compete agreements enforceable in Oklahoma? 
No.  Generally, a pure non-compete restriction is not enforceable under Oklahoma law.  Consider this blog post for information on the enforceability of pure non-compete restrictions.

In what scenarios might Oklahoma non-compete agreements be enforceable? 
There are two scenarios where a pure Oklahoma non-compete agreement might be enforceable (a) when a business owners sells the business and the sale includes the goodwill of a the business; and (b) when partners create non-compete restrictions in anticipation of the dissolution of the partnership or company through which they are doing business.  Consider this blog post for more information.

Posted by Shawn Roberts in Oklahoma non-compete

How NOT to use an Oklahoma nondisclosure agreement

I have written about Oklahoma nondisclosure agreements and how businesses can and should use nondisclosure agreements with employees to protect confidential information.  The goal, in my opinion, is for a non-disclosure agreement to allow an Oklahoma business to protect information that gives it a competitive advantage over it competitors.

There is another use of nondisclosure agreements that morally wrong and legally perilous:  Using a nondisclosure agreement to cover up illegal or immoral actions.  An example is how formerly famous and now infamous movie producer Harvey Weinstein used nondisclosure agreements: 

To silence people who he had harassed and to silence people who knew about Weinstein’s harassment, essentially covering up his evil acts. 

Essentially, Weinstein used a proper legal tool-the nondisclosure agreement, to cover up his illegal and immoral conduct, allowing the conduct to continue for years unchallenged.

Mr. Weinstein’s gross misuse of the nondisclosure agreement is detailed by PBS in its Frontline series in What Happens If Someone Breaks a Non-Disclosure Agreement?

“We were not allowed to speak to anybody obviously, friends, family, press, public, private, about the alleged behavior, but also about our time at Miramax,” Zelda Perkins, a former assistant to Weinstein, said in an interview for the FRONTLINE documentary Weinstein. “This wasn’t a normal confidentiality agreement. This wasn’t us saying that we weren’t gonna, you know, give away corporate secrets. This was a deeply, personally binding agreement.”

Nicole Einbinder did excellent work demonstrating how one can misuse a tool that I recommend Oklahoma employers use for legitimate purposes.  You can check out the Frontline episode here:

WEINSTEIN

 

 

 

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

How does an Oklahoma employer protect its private property when an employee leaves?

Hoodoos Of Bryce Canyon

While Oklahoma is broadly opposed to non-compete agreements, it provides several devices for Oklahoma employers to protect their private property that gives the business its competitive edge, when employees leave.  

Movement is positive

Employee movement from job to job or from job to business start-up is natural and healthy.  The owners of many Oklahoma businesses were once employees of an Oklahoma business, who left to start their own business. What is not natural or healthy, is employees who leave a business to work for a competitor and take the former employer’s private property.  The property, for our purposes, is data, handbooks, formulas, strategies, pricing and, perhaps a bit surprising, customers.

Continue reading →

Posted by Shawn Roberts in Blogposts, Oklahoma Employment Law, Oklahoma non-compete

The tools an Oklahoma Employer can use to protect itself when employees leave

From Flickr user Alan Levine

If you have read my blog even a little bit, you are probably aware that pure non-compete agreements are not allowed by Oklahoma except in two limited situations (see this post for the exceptions).

A pure non-compete is one that restricts an employee from working in their chosen field or industry.

While Oklahoma has decided it will generally not do non-competes, it doesn’t ignore the legitimate needs of Oklahoma employers to protect their companies. Oklahoma law provides employers several mechanisms to request employees to agree to reasonable limits on how they can use what they learn and see when they move on to a new employer.  These are tools all Oklahoma employers need to utilize as reasonable, value-protecting methods to protect what makes a company unique and provides an advantage over the competitions:

Non-Solicitation of Customers
A non-solicitation restriction is indeed what it sounds like – a promise by an employee to not solicit the employer’s established customers after the employee leaves employment and either joins a competing company or starts the employee’s own competing company. A non-solicitation restriction in an employment contract would look something like this:

7.2 For a period of one (1) year after cessation of Employee’s employment with Company, Employee shall not directlyy solicit any of the established accounts, clients, or contractors of Company.

Oklahoma law typically requires the time period for the non-solicitation restriction to be “reasonable” a term that has interpreted by Oklahoma courts to run somewhere between 1 and 3 years.

Non-Solicitation of Employees
While the non-solicitation restriction discussed above relates to customers, there is also another non-solicitation restriction that relates to employees. Customers are the lifeblood of a business and employees are a component of operating a business that serves customers well, convincing customers to stay customers.

When an employee departs either to a new employer or starts her own company, there is usually a temptation to ask other employees to join her. There is nothing mysterious or sinister about this – people find other people to work with through relationships. The former employee often finds people to hire by talking to people she used to work with.

While this is natural, Oklahoma law allows an employer to ask an employee to agree to not use those relationships with other employees to take the employees away from the employer. This is accomplished with a non-solicitation of employees restriction that often reads like this:

7.1 For a period of one (1) year after cessation of Employee’s employment with Company, Employee shall not directly or indirectly solicit the employment of, or hire any person employed by Company as of the cessation of Employee’s employment with Company, or cause any person employed by Company to terminate such employee’s relationship with Company without the prior written approval of Company.

From Flickr User Kim Siever

Non-Disclosure of Information
Again, Oklahoma’s non-disclosure restrictions (sometimes confusingly referred to as “confidentiality”) is what it purports to be: A restriction that prevents a former employee from sharing the private and proprietary information of the former employer.

Non-disclosure provisions are a critical component in an employment agreement because the non-disclosure provision establishes that the employer has a basic expectation that its private business information must be protected. Non-disclosure restrictions typically look something like the blurb below:

6.1 Confidential Information. “Confidential Information” means proprietary business information, Trade secrets and/or confidential Information regarding the business of Company or its clients. The confidential information is to include Company’s legal, financial, methods of operations, software developments, submission and proposal procedures, client lists, or any other information pertaining to the business of Company. Employee acknowledges and agrees that the business and good will of Company depends upon the protection of any adherence to the keeping of Confidential information confidential.

6.2 Non-Disclosure. Except when directed in writing to do otherwise by Company, and except as required by law, court order, or subpoena, Employee shall keep confidential and shall not divulge to any other person or entity, during the time of the agreement any confidential information. In any case where Employee is compelled by law, court order, or subpoena to disclose any confidential information to a third party, Employee shall advise Company in advance of such requirement and shall permit Company to object, contest, intervene, and/or obtain appropriate protection of such information prior to disclosure to any person unless commanded by law officials or advised against doing so by legal counsel representing Employee.

The Takeaway for Employers

The takeaway is, Oklahoma employers, know the legitimate legal tools you can use to protect your business when employees leave and use them.

Postscript

When I first considered this blog post I thought it might be titled “How an Oklahoma employer can weaponize to protect itself from departing employees”. However, those words do not convey the intent of this post. My intent is to share some mechanisms employers can use to protect their business from employees who might choose to not compete fairly after leaving.

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

Parsing the many meanings of the phrase “Oklahoma non-compete”

The phrase “Oklahoma non-compete” is thrown around quite often, indeed it is a popular Google search term.  Yet “non-compete” is often used to describe 4-5 separate employee restrictions without specifying whether it is intended to include all of or even any of the component parts of the phrase.

It is important to distinguish the type of restrictions we are discussing. Many people lump all employment restrictions under the broad term non-compete.  Below I break down what I see as the component restrictions often included in the phrase “Oklahoma non-compete”.  Then, I provide examples of contract language corresponding with each component part.  My purpose is to help you better understand and be able to parse the word “non-compete” when you encounter it.

Pure Non-Compete

There is the pure non-compete which prevents an employee from working in the industry. The pure non-compete, as I discussed in this blog post, is typically unenforceable under Oklahoma law.

Employee shall not, within a radius of fifty (50) miles from anywhere that Employer maintains an office or facility from which Employer’s business is then-conducted, serve as an incorporator, director, officer, partner, employee, manager, consultant, agent, independent contractor, advisor, stockholder or otherwise, or directly or indirectly own an interest in, provide any financing for, or perform any services for himself herself, or on behalf of any person, business, corporation, partnership~ entity or organization that directly or indirectly engages in competition with. the Business engaged in by Employer.

Non-Solicitation – employees & contractors

There is the non-solicitation restriction which generally prohibits a person from taking direct or indirect action toward an employee or contractor of the former employer, intended to convince the employee to leave their current employment and join a new venture.   Oklahoma law authorizes this type of employment restriction in this statute.
The Employee agrees and covenants not to directly or indirectly solicit, hire, recruit, or attempt to hire or recruit, any employee or contractor of the Company or any employee who has been employed by the Company in the 24 months preceding the last day of Employee’s employment (“Covered Employee”), or induce the termination of employment of any employee of the Company.

Non-solicitation – customers

There is the non-solicitation of customers restriction which prohibits a person from taking direct or indirect action intended to convince a customer of the former employer to join the former employee in a new business.

The Employee agrees and covenants, for a period of 24 months, beginning on the last day of the Employee’s employment with the Company, not to directly or indirectly solicit, contact, or attempt to solicit or contact, using any other form of oral, written, or electronic communication, including, but not limited to, email, regular mail, express mail, telephone, fax, instant message, or social media, including but not limited to Facebook, LinkedIn, Instagram or Twitter, or any other social media platform, whether or not in existence at the time of entering into this agreement, or meet with the Company’s current, former, or prospective customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.

Non-disclosure

The non-disclosure restriction prohibits a person from using or disclosing a former employer’s confidential information.
Except when directed in writing to do otherwise by EMPLOYER, and except as required by law, court order, or subpoena, EMPLOYEE shall keep confidential and shall not divulge to any other person or entity, during the time of the Agreement any Confidential Information.  In any case where EMPLOYEE is compelled by law, court order, or subpoena to disclose any Confidential Information to a third party, EMPLOYEE shall advise EMPLOYER in advance of such requirement and shall permit EMPLOYER to object, contest, intervene, and/or obtain appropriate protection of such information prior to disclosure to any person unless commanded by law officials or advised against doing so by legal counsel representing EMPLOYEE.
Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

Get on the right track for analyzing your Oklahoma non-compete agreement

image

Have you wondered if there is an easier path to begin the analysis of an Oklahoma non-compete agreement?  If so, you are in luck.

I have written extensively about Oklahoma non-compete agreements, non-solicitation agreements, non-disclosure agreements and related competition documents. Recently, it ocurred to me that there is a better to explain how Oklahoma competition law fits together.

Oklahoma public policy is decisively against non-compete agreements . . . that limit employees.  This directly in contrast to a couple of other areas where Oklahoma public policy expressly allows non-compete agreements.  Those areas are when partners make an agreement about how to handle the break-up of a partnership and if the goodwill of a business is sold.

Determining whether you fit into to the first or second scenario is about 99% of the battle in determining whether the non-compete restriction will be enforceable.  To best understand Oklahoma competition law, think of an analysis moving across two tracks:

 

  1.  Were you an employee when you signed the restrictive agreement?
  2. Were you an owner of a business when you signed the written agreement?

The answer to these questions determines your track.  If you are on tract 1, consider this post for some additional guidance.  If you are on track 2, consider this post for additional guidance.

 

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

While you were sleeping . . . Oklahoma non-compete law changed a bit

The New Law

While you were [probably] sleeping, Oklahoma law about non-compete agreements and non-solicitation agreements shifted a little bit.  The new law passed in May 2013 went into effect as of 12:00 a.m. today as Title 15 O.S. sec. 219B:

A contract or contractual provision which prohibits an employee or independent contractor of a person or business from soliciting, directly or indirectly, actively or inactively, the employees or independent contractors of that person or business to become employees or independent contractors of another person or business shall not be construed as a restraint from exercising a lawful profession, trade or business of any kind. Sections 217, 218, 219 and 219A of Title 15 of the Oklahoma Statutes shall not apply to such contracts or contractual provisions.

Regular readers of this blog know that non-compete related topics are a popular subject.

What does this mean?

Not nearly as much as you might think.  Similar to many laws that result from the political process, it appears to be “full of sound and fury” but ends up signifying . . . very little.  This law was passed in response to a decision from the Oklahoma Supreme Court that voided out an entire employee non-solicitation clause because it also prohibited hiring people that might seek employment on their own initiative and without any solicitation or inducement by past employees. In light of this decision, some people thought that all “anti-raiding” provisions might be unenforceable under Oklahoma law.

The practical effect

An employer and an employee (or independent contractor) can agree that when an employee leaves the employer, the employee will not try to hire away the employer’s other employees.  An employer may lose one employee, but that doesn’t necessarily mean there is going to be a mass exit of other employees.

The result of this new statute is that provisions that are in many sharply-drafted employment agreements are now “officially” enforceable (assuming they comply with the statute of course).

Daniel Joshua Salinas identified one other notable item about the new law in this blog post: the law permits restrictions on non-solicitation of employees but does not appear to limit the hiring of those people.

  An example

Here is an example of what a restrictive non-solicitation clause might look like in an employment agreement:

During the term of the Employee’s employment under this Agreement and for a period of twenty-four (24) months thereafter or, if longer, a period of twenty-four (24) months following the termination of the Employee providing any services to the Company, whether such termination be by the Company or by the Employee, the Employee will not directly or indirectly (i) recruit, solicit, encourage, or induce any employee of the Company or its affiliates to terminate such employment (ii) approach any such person for any foregoing purposes, (iii) otherwise disrupt any such employee’s relationship with the Company or its affiliates.

By the way, if you copy this language and use it in an agreement, you are doing so at your own peril and you will get no more than the value you paid for it :).

 

 

Posted by Shawn Roberts in Blogposts, Oklahoma Employment Law, Oklahoma non-compete

The Oklahoma Non-Compete Agreement in 10 [simple] slides

Have you ever wanted to know the basics of Oklahoma non-compete law but didn’t want to read 20 blog posts?

Oklahoma non-compete agreements are a frequent topic on this blog. I have written thousands of words about non-competes and related issues.

It occurred to me that since not everyone has time to comb through thousands of words, I could distill the main non-compete issues into a simple presentation. Check out the slide show below.


Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

Did you sign a “back-door” Oklahoma non-compete?

Oklahoma non-compete law in the employment setting remains crystal clear: Non-competes are unenforeceable except in a couple of narrowly defined circumstances. That doesn’t mean some people won’t continue to try to accomplish indirectly what cannot be done directly.

This is where the back-door non compete comes in. What is a back-door noncompete?

It is a contract clause that despite not expressly limiting the former employee from working, effectively creates a market so small, it is like being prohibited from competing. Consider this example:

Employee covenants and agrees that during the period of time while employed by SMITH CO, and for a period of two years after the date of termination of such employment, whether voluntarily or involuntarily, with or without cause, the Employee shall not directly or indirectly render widget-making services of any type, including, but not limited to, traditional and Internet, to any person or entity, that during the 24-month period
immediately prior to Employee’s termination of employment with SMITH CO:

 

  1. SMITH CO provided any services to such person or entity;
  2. SMITH CO offered to provide any services to such person or entity; and/or
  3.  Such person or entity requested SMITH CO to pitch or bid to provide any services.

Notice of a couple of things:

➜at first glance while the former employee is limited from providing certain services, the limitation appears to be itself limited.
➜however, the limitation is written so broadly that it could apply to nearly every customer or potential customer the former employee would encounter.
➜while the employee can open a business, she simply can’t talk with most of the universe of customers that might be natural prospects.

This is the back-door non-compete. Beware.

Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

A look at how Oklahoma non-compete law fits together

Non Compete - super slim

Have you ever wondered what the Oklahoma Statutes would look like in a picture? You will find the answer below.

Sometimes it is easier to visualize rather than read complicated but interrelated topics. This concept even applies with the Oklahoma Statutes that cover Oklahoma non-compete law.

There are several statutes that make up Oklahoma non-compete law and they are laid out below in this handy diagram.

Restraint of Trade


Posted by Shawn Roberts in Blogposts, Oklahoma non-compete